real estate

New home bait-and-switch is common

Steve McLindenQuestionDear Real Estate Adviser,
My husband and I are under contract for a townhome under construction. In the advertising materials, it clearly stated our lot number and model would be 2,513 square feet of finished living space. However, we have found that the new home being built is actually only 2,300 square feet. Do we just write this off as a learning experience or do we have a cause for legal action?
-- Heather

AnswerDear Heather,
It looks like you have fallen victim to a quasi-legal, yet relatively common industry "bait-and-switch" tactic. The builder's marketing brochure no doubt spelled out the details of a spacious new town house pegged for your lot that is 213 feet larger than what you're actually getting.

Unfortunately, that kind of promotional material can never be counted on as an assurance of what the end product will be. The buyers, and ideally a real estate lawyer or similarly qualified attorney, have to carefully shepherd those details through the pipeline.

I am guessing the original footprint you discussed somehow shrank between the time you agreed to the purchase of the town house and the time you actually signed a sales contract. By now, you've probably been told by the contractor or builder that there must have been a misunderstanding.

Of course, if your contract does say in black and white that you are due a 2,513-square-foot town house, you've got the builder deed to rights and have grounds to be compensated proportionately -- or just under 10 percent of the price, setting aside any kind of punitive damage.

However, I'll bet that upon further review, your contract actually calls for the smaller 2,300-square-foot footprint. Read it carefully.

The vast majority of home-purchase contracts with builders have a clause saying something to the effect that any dispute between the purchaser and the builder will be decided by binding arbitration. Assuming you signed something such as that, you have basically waived any right to take the builder to court.

Of course, there may be some recourse in arbitration if you can prove you were deceived. But arbitrators seldom award damages much over those actually incurred by the homeowner. You could hire an attorney to assist you in the process. However, you may end up departing the arbitration table with little or nothing for your trouble after forking out filing fees that start at around $400 and much more in legal fees.

Even if an actual court were to somehow look at your dispute, it's unlikely it would make the builder rescind the contract and take the town house back (which might be the optimal result). In your case, it may be difficult to determine what damages would be beyond compensation for the 213 "lost" square feet. Unfortunately, barring any contractual backing of your claim, you may have to chalk this one up to a learning experience, as you say.

Still, don't be afraid to file a Better Business Bureau report or a complaint with your attorney general's office if you feel deceived. If enough complaints are filed, a deceitful builder will be exposed and sales will suffer as bad publicity ensues.

As I recently advised another soon-to-be occupant of a newly built home, try to stop by the building site early and often to make sure everything else is being done according to your agreement.

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